INDUSTRY SPOTLIGHT
KENYA FINANCE SPOTLIGHT Interview: Kenya Bankers Association (KBA) We speak with Habil Olaka, CEO of the Kenya Bankers Association as the pioneering association to champion an innovative and inclusive banking sector in Kenya
INTERVIEW
Writer: Phoebe Harper | Project Manager: Krisha Canlas
Habil Olaka CEO, Kenya Bankers Association
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s an umbrella body for all commercial banks regulated by the Central Bank of Kenya (CBK), the Kenya Bankers Association (KBA) stands as the collective voice behind the East African country’s dynamic finance sector. Promoting industry development and economic growth, we explore the association’s origins and current objectives with CEO, Habil Olaka. Africa Outlook (AO): Can you talk us through the origins of the KBA, how it came about, and its initial vision? Habil Olaka, CEO (HO): The KBA was registered as an industry association on 16th July 1962 by the Registrar of Trade Unions. In its formative years, the main aim of the association was to cater for the interests of the member banks in negotiating terms and conditions of service amongst employees
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unable to unionise, and as far as possible to standardise management practices to ensure harmony in the industry. Over time, the ambition of the association has evolved to include promoting industry development and economic growth by engaging the government and sector regulator, Central Bank of Kenya (CBK). Under the current Strategic Plan (2019- 2023), KBA is working closely with its members and stakeholders to intensify efforts towards deepening financial inclusion across all segments of the economy by facilitating access to affordable banking services through enhanced technological innovation and sector-wide efficiency programmes. As the umbrella body of the commercial banks licenced and regulated by the CBK with a current membership of 46 financial institutions, KBA continues to reinforce a reputable and professional banking sector in a bid to best support Kenyans, who entrust their ambitions and hard-earned resources with its member banks. AO: Since inception, how has the KBA developed and progressed in terms of its key objectives and the messages it tries to get across? HO: As the leading industry advocacy group of the financial services sector, it is our ambition to ensure that we continue to be relevant to
KENYA BANKERS ASSOCIATION (KBA)
banks and the banking public. We recognise as banks that our market is dynamic, and we face increased competition both internally across banks and externally from new entrants such as non-bank FinTech’s. We seek to ensure we stay connected to our customers by improving service delivery, lowering the cost of banking services, and advocating for an enabling environment that promotes financial services innovation. In line with our commitment to promote financial inclusion for all, the association has rolled out various initiatives aimed at facilitating access to credit and deepening the participation of vulnerable groups in the financial system. One of these initiatives includes the Inuka SME Programme, which seeks to build capacity among small businesses to formalise and run smoothly in order to access credit. In 2021, the programme reached over 10,000 MSMEs in Kenya. The association has also been keen to remove technological and physical barriers that limit the participation of persons with disabilities in the financial system. Under the Digital Accessibility Project being coordinated by KBA, 31 banks have articulated their initial accessibility plans, setting the stage for a phased-out implementation of accessibility initiatives. The blueprints have been consolidated into a harmonised industry roadmap which we hope will see all banks achieve full accessibility by the year 2024 or sooner. They
include setting up mechanisms to identify persons with disabilities whenever they visit bank branches and having service counters dedicated to this important segment of the banking public. The industry has also developed a Kenyan sign language application called the Deaf Elimu Banking Mobile App, to support bank staff to learn bankenvironment sign language and serve customers better. The association has also sustained research to inform the sector’s policies, regulations, and strategic positions. We are proud of the gains achieved through our research efforts, which have enabled us over the years to coordinate our advocacy programmes from a fact-based perspective. AO: What do you find most exciting about Kenya’s finance sector? HO: I think one of the most inspiring aspects of Kenya’s financial sector is the pace of innovation. This market continues to pioneer some of the most transformative financial innovations that resonate with the prevailing needs. These include trendsetting solutions such as mobile money transfer service, M-PESA. We also have the bank account to bank account funds transfer service, PesaLink, which facilitates the transfer of funds from one bank account to another in real time. Africa Outlook issue 95 | 3
OPPORTUNITIES IN DRC FOR EAST AFRICAN INVESTORS An interview with DR. JAMES MWANGI, CBS Equity Group Managing Director & Chief Executive Officer
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here has been excitement across the East African Community (EAC) about the impending admission of the Democratic Republic of Congo (DRC) as the seventh member state of the regional economic bloc. Kenya’s largest financial institution, Equity Group Holdings, was among the first Kenyan businesses to take a leap of faith in investing in the Central African Country when it acquired two banks in the DRC. It is also at the forefront of promoting trade between the two countries through facilitating business exchange programmes and provision of financing. We recently caught up with the Group’s Managing Director and Chief Executive Officer, who shed more light on the significance of DRC’s entry into the EAC. Equity Group Invested in DRC at a time when not many local or regional businesses were interested in the country. What advised Equity’s bold step? Equity Group’s strategy is to promote financial inclusion by reaching 100 million individuals and enterprises in fifteen subSaharan African countries in line with
our purpose of transforming lives, giving dignity and expanding opportunities for wealth creation. DRC has huge untapped potential and a large market with a youthful population and labour force of almost 100 million people, very few of whom have access to banking services. Equity was best placed to drive financial inclusion for the youth, women, smallholder farmers and micro, small and medium enterprises (MSMEs). The country is also very urbanised with over 40 million people living in urban centres. Other factors that informed our decision include the close proximity to countries we already operate in like Tanzania, Rwanda and Uganda that informed our decision. Additionally, the country has a favorable business environment brought about by the peaceful political transition which has enhanced stability. The current government has been intentional about attracting foreign investment and is working hard to improve infrastructure in a bid to modernise the economy. DRC’s economy is also poised to grow exponentially in the coming years owing to the mineral wealth which is valued at over USD 24 trillion. This makes the country an attractive destination
for those looking for opportunities in the mining sector which range from oil, precious stones, industrial and manufacturing metals and high tech metals. We wanted to be a facilitator and a catalyst as DRC takes off. For businesses across the EAC region looking at investment in DRC, what specific opportunities does the country offer? The DRC government has gazetted nine prioritised sectors but investors in other sectors are free to invest as the economy is liberalised. The mining sector provides investment opportunities and is already contributing to over 41 percent of the country’s GDP. Agro-processing, infrastructure and the ICT sectors also provide prime investment opportunities. Other sectors include health, education, water and sanitation which can be explored by private sector investment to accelerate DRC’s efforts in deepening the quality of life demanded by an increasingly growing middle class. The forestry sector in the Congo Basin is the world’s second largest contiguous equatorial tropical rainforest, covering 314 million hectares. Tourism has a huge
potential as DRC’s ecosystem varieties cover 145 million hectares. The country also boasts of seven National Parks, 57 Reservation Areas and many other tourism sites. How is Equity positioning itself to facilitate trade between the two countries? Equity views MSMEs as the largest vehicles for indigenous capital and entrepreneurship. We have continuously financed the MSME sector across the six countries we operate in. This segment now constitutes 72 percent of our loan and credit portfolio. Additionally, we have recently launched the Africa Recovery and Resilience plan which aims to inject over USD 6 billion into the economies of East and Central African countries to stimulate trade and enterprise as we emerge from the COVID-19 pandemic. This plan will see us lend and advance loans to five million MSMEs and 25 million individual young people and women over the next five years. Equity has also been providing linkages to continental markets for Kenyan and DRC traders. We facilitated a 15-day trade mission to DRC in December last year by mobilising MSMEs from Kenya and DRC. The mission allowed over 350 Kenyan businessmen and women to network and link their businesses with their over 2,000 counterparts in the DRC. We have continued to innovate around our financial services provisions to enable cross-border trade between the countries we operate in. Today, a trader with a bank account in Kenya will transact seamlessly in DRC without the
need to open a local bank account under our integrated banking services offering.
population of 284 million people and a GDP of USD 284 billion.
How does DRC’s entry into the regional bloc plug into the African Continental Free Trade Area (AfCFTA) agenda of promoting intercontinental trade?
What role do you see Kenya playing going forward when it comes to EAC’s engagement with DRC?
The overarching objective behind the AfCFTA is the elimination or reduction of tariff and non-tariff barriers amongst the 54 countries that agreed to be members of the bloc by providing a single market for goods and services, facilitated by movement of persons in order to deepen economic integration and prosperity. The admission of DRC into EAC will provide strategic access to the Atlantic coast of Africa, linking the Indian Ocean to the Atlantic Ocean and providing shorter, strategic and lucrative trade routes across the continent. AfCFTA offers a huge market with a combined population of 1.3 billion people and a GDP of USD 3.4 trillion. EAC after DRC’s entry will contribute a combined
Kenya is an anchor to regional trade, establishing itself as a transport and logistics gateway to East and Central Africa. Kenya Airways continues to be the pride of Africa driving air transport in the region, having established new routes, including to Goma and Lubumbashi in DRC. Kenya’s investments in Mombasa and Lamu ports as well as LAPSETT and Northern Trade Corridors are bound to deepen trade within EAC and beyond. DRC and Kenya have a cooperation agreement under which, Kenya has already started the process of establishing consulate in Goma, North Kivu, and appoint an Honorary Consul in Lubumbashi, Greater Katanga region to deepen Kenya’s diplomatic footprints and facilitate trade. Kenyan SMEs and corporates have also developed a healthy appetite for trade within EAC and the robust private sector will therefore play a key role in deepening trade and investments in the region. Additionally, Nairobi is a globally recognised and mature regional financial hub with a well-developed financial sector that is bound to become even more critical once the Nairobi International Financial Center is fully operationalised. Kenya is thus a key partner in mobilising finance and investments into DRC and the region from both domestic and foreign investors. Africa Outlook issue 95 | 5
INDUSTRY SPOTLIGHT
Indeed, it is on account of innovation that the COVID-19 pandemic health crisis did not degenerate into a financial crisis. The digital readiness of the industry enabled banks to quickly switch to online and mobile banking services, ensuring that there was no disruption of financial services. Beyond technology, the banking industry has also excelled in designing products customised for various customer segments. Innovation accounts for the longstanding reputation for resilience of the Kenyan industry.
“ K B A CO N T I N U E S TO R E I N F O R C E A R E P U TA B L E AND PROFESSIONAL BANKING S E C TO R I N A B I D TO B E ST S U P P O R T K E N YA N S , W H O ENTRUST THEIR AMBITIONS AND HARD-EARNED RESOURCES WITH ITS MEMBER BANKS”
INTERVIEW
– HABIL OLAKA, CEO, KBA
Dr. Olaka with Kamukunji Innovation Hub Patron Hon. Yusuf Hassan during the signing on an agreement that will see over 3,000 youth-led enterprises trained under the Association’s Inuka Enterprise Programme
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AO: On the flip side, what are its biggest challenges? HO: Financial inclusion remains a key challenge for the financial services sector. Although access to financial services has risen to 83.7 percent in 2021 compared to 26.7 percent in 2006, more needs to be done. In fact, the 2021 Fin Access Household survey indicates that despite growth in access to banking services, exclusion also grew from 11 percent to 12 percent in 2021. In a bid to deepen inclusion, Kenyan financial institutions are already on a digital transformation journey, primarily aiming to create more channels to access customers. The second aspect is reducing the comparatively high cost of credit in the market. As banks are working to serve MSMEs and clients in remote areas, they need to offer products adapted to the budgets of those clients. We aspire to continue facilitating further access to affordable banking services through enhanced technological innovation and sector-wide efficiency programmes, as well as through enterprise capacity building initiatives.
KENYA BANKERS ASSOCIATION (KBA)
AO: What trends are currently transforming the finance sector in your region? How are you responding to them? HO: While the industry’s growth trajectory has been slowed to some extent by COVID-19, I think the pandemic has also transformed traditional operating and customer service models. In my view, COVID-19 triggered new possibilities. For instance, financial institutions have now introduced the working from home model. The number of customers that need to visit a bank physically to transact has also shrunk, thanks to the enhanced use of technology at the peak of the pandemic. Banks also continue to expand their regional presence, extending the frontiers of their operations beyond geographical borders. I think the industry continues to respond well to this and other prevailing dynamics through continuous innovation. AO: How do you see the sector developing over the next five years? HO: The next five years will without doubt continue to be defining for the industry. The rapid integration of technology will continue to have a massive impact
on the industry, facilitating further access to financial services especially in remote areas. I also see Kenyan banks continuing to expand their footprint in the region, initially into East Africa and then beyond. This will align with the trend being set by their West African counterparts (such as UBA, Ecobank, Access Bank, and Guarantee Trust Bank), which are expanding their footprint in the East African region. The other aspect of projected growth and expansion I would like to highlight regards the constraining nature of regulation. Rapid growth will attract enhanced regulation to contain threats such as fraud, money laundering, financing of terrorism, and issues to do with corporate governance. With expansion, the regulations are bound to continue tightening, causing the cost of compliance to continue spiralling. Talent wars are also bound to escalate in tandem with growth. With increased sophistication, a skilled workforce will demand a premium for their services.
INTERVIEW
Ms. Lucie Pulschke, GIZ Water and Energy for Food (WE4F) East Africa Hub Manager (Centre); Mr. Armin Kloeckner; GIZ Head of the Agriculture Programme (Far Right) and Kenya Bankers Association CEO Dr. Habil Olaka during the signing of an agreement to support agri-based enterprises
Tel: +254-20-222401 info@kba.co.ke www.kba.co.ke Africa Outlook issue 95 | 7
KENYA BANKERS ASSOCIATION 13th Floor, International House Mama Ngina Street Nairobi, Kenya P.O.Box 73100 - 00200 Tel: +254-20-2221704 / +254-20-2217757 +254-20-2224014 / +254-20-222401 info@kba.co.ke www.kba.co.ke
PRODUCED BY AFRICA OUTLOOK MAGAZINE